For the third quarter of fiscal year 2016, Key Tronic reported total revenue of $118.4 million, up 2% from $116.4 million in the previous quarter and up 5% from $112.9 million in the same period of fiscal year 2015. For the first nine months of fiscal year 2016, total revenue was $361.1 million, up 15% from $313.6 million in the same period of fiscal year 2015.

As expected, the Company saw sequential improvement in operating efficiencies. For the third quarter of fiscal year 2016, gross margin was 8.4% and operating margin was 2.3%, up from 7.8% and 2.1%, respectively, in the prior quarter.

Net income for the third quarter of fiscal year 2016 was $1.8 million or $0.16 per share, compared to $1.9 million or $0.16 per share for the third quarter of fiscal year 2015. The results for the third quarter of fiscal year 2016 reflect an extra week due to the Company's 53 week fiscal calendar this year. For the first nine months of fiscal year 2016, net income was $4.4 million or $0.39 per share, up 123% from $2.0 million or $0.17 per share for the same period of fiscal year 2015.

"We're pleased to see revenue growth and improvement in operating efficiencies, as our new programs continue to ramp and we continue to invest in improving our operations to accommodate a more diversified customer base," said Craig Gates, President and Chief Executive Officer. "At the same time, we continue to see a robust pipeline of potential new business and our third quarter wins include a new program involving industrial lighting."

"In the fourth quarter of fiscal year 2016, we expect the ramp of new programs will continue to outpace the previously discussed decline of a longstanding customer. While we continue to onboard several new customers and programs, we anticipate that we will see gradually improving operating efficiencies in coming periods."

Business Outlook

For the fourth quarter of fiscal year 2016, the Company expects to report revenue in the range of $117 million to $122 million, and earnings in the range of $0.16 to $0.21 per diluted share. These expected results assume an effective tax rate of 25%.

Conference Call

Key Tronic will host a conference call today to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern). A broadcast of the conference call will be available at www.keytronic.com under "Investor Relations" or by calling 888-329-8862 or +1-719-325-2376 (Access Code: 4162151). A replay will be available by calling 888-203-1112 or +1 719-457-0820 (Access Code: 4162151). A replay will also be available on the Company's Web site.

About Key Tronic

Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico and China. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world's leading original equipment manufacturers. For more information about Key Tronic visit: www.keytronic.com.

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects or targets or nouns corresponding to such verbs. Forward-looking statements also include other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company's statements regarding its expectations with respect to quarterly revenue and earnings during fiscal year 2016. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to the future of the global economic environment and its impact on our customers and suppliers, the availability of parts from the supply chain, the accuracy of customers' forecasts; success of customers' programs; timing of new programs; success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; and the other risks and uncertainties detailed from time to time in the Company's SEC filings.

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

April 2, 2016

March 28, 2015

April 2, 2016

March 28, 2015

Net sales

$

118,448

$

112,915

$

361,060

$

313,568

Cost of sales

108,493

103,479

333,076

290,655

Gross profit

9,955

9,436

27,984

22,913

Research, development and engineering expenses

1,634

1,510

4,696

4,143

Selling, general and administrative expenses

5,564

5,375

16,348

15,407

Total operating expenses

7,198

6,885

21,044

19,550

Operating income

2,757

2,551

6,940

3,363

Interest expense, net

620

317

1,674

910

Income before income taxes

2,137

2,234

5,266

2,453

Income tax provision

354

373

879

489

Net income

$

1,783

$

1,861

$

4,387

$

1,964

Net income per share — Basic

$

0.17

$

0.18

$

0.41

$

0.19

Weighted average shares outstanding — Basic

10,711

10,552

10,709

10,551

Net income per share — Diluted

$

0.16

$

0.16

$

0.39

$

0.17

Weighted average shares outstanding — Diluted

11,068

11,556

11,298

11,457

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

April 2, 2016

June 27, 2015

ASSETS

Current assets:

Cash and cash equivalents

$

275

$

372

Trade receivables, net of allowance for doubtful accounts of $112 and $97